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The changing face of American manufacturing

Unions worry the “re-shoring” of jobs back to the U.S. will come at the expense of workers’ wages.

United Electrical reps Chris Townsend, left, and Roger Zaczyk, fear GE's Erie and Fort Worth plants will be pitted against each other, with workers having to take pay cuts to compete. (John Heller / AP)

Staying true to the narrative, following the arc from what was the beginning, a call was placed to Lise, who said it just wasn’t a good time to talk, not right now. She was crying when she said that.

Lise, wife of Ralf Zapke. Ralf was a crane operator who had spent 19 years working for Electro-Motive Diesel in London, Ont., until parent Caterpillar Inc. tabled a demand for a 50-per-cent wage haircut and the workers were locked out and a cancer-stricken Ralf Zapke found himself on a snowy January Saturday protesting Caterpillar in a crowd of thousands.

Zapke’s name wasn’t on the union handout of suggested contacts. He was just standing there, quietly on that bright and cold all-Canadian day, crisp snow underfoot, picture-book sky, the kind of guy a writer can turn a story on, cause you just know he’s real, and not somebody’s mouthpiece.

Zapke had been off work for seven months on sick leave, getting chemo treatments. “Just trying to get through life,” he said. Picketers’ placards seem to paper the world that day, yelling in big letters about corporate greed and the big bad Cat.

Zapke had come in to EMD at $17 an hour back in ’93, working first as a maintenance welder. “It was perfect. Right up my alley,” he said. He was damned handsome on that day, 49 years of age, riffing with his pals on recent efficiencies that had been achieved in the plant and the trust and promises that had been made in exchange.

Over the years Zapke’s pay had bumped up and up, laddering to a middle-class life and a lovely home and a pay rate that hit $32.91 an hour.

His job classification under Caterpillar’s new deal set his proposed hourly wage at $18. It was kind of hard to process. “I don’t see how they can justify it,” was his unembellished comment.

There were a whole pile of angry speakers that day, including Roger Zaczyk, a big, bearded guy, president of United Electrical Local 506 in Erie, Penn. Zaczyk got the crowd going quickly with a simple chant: “Defend good jobs for all, whattya think?” The Erie plant is not owned by Caterpillar but by its toughest competition, General Electric Co., the industry leader in locomotive manufacture. It was a brothers-in-arms moment.

You know what happened next. Caterpillar announced the closure of the plant and the locomotive focus turned to Muncie, Ind., and Cat’s new lower-wage, non-unionized locomotive operation there. It was a corporate shock-and-awe operation.

As if that were the end of the story.

Elk likes to say that he was born in the Bronx, grew up in Queens and exited through Manhattan, but he has arrived here in Fort Worth on a reconnaissance trip from Pittsburgh, where he is international representative for the United Electrical, Radio and Machine Workers of America, the same group that has Roger Zaczyk installed as president of Local 506.

The UE represents roughly 4,000 dues-paying workers at the General Electric locomotive plant in Erie, where the going-in wage for a Class 2 assembler is $28.13 and a Class 1 assembler commands $29.31.

In May of last year, GE Transportation, a division of the $142-billion (U.S. revenues) global GE behemoth, announced plans for a new locomotive facility in Fort Worth and the creation of 500 new jobs.

Ever since, the union has been nervous, looking back to the Caterpillar example, wondering if the same fate awaits the GE workers. Zaczyk had said as much. “I look for that to happen eventually down the road with Erie and Fort Worth,” he said in a phone interview. “It’s like a fear in the back of your head. You know?”

“I don’t know how familiar you are with union terms,” he went on to say. “It used to be called whipsawing. Basically pitting one plant against another plant doing like product, which is kind of like Texas and Erie.”

So Gene Elk’s Fort Worth mission — this is his third trip — is to work a little shoe leather to determine how far along GE has got in building that plant. He’s also on the hunt for the newly hired, workers on the inside who would be well-disposed to a union drive.

The previous evening at Sonny Bryan’s Smokehouse — which is pretty much like walking into a life-sized smoker — Elk had run through his union bona fides. His uncle, Herbert Nichol, had helped organize a GE insulator plant in Baltimore back in the ’40s. Nichol was later a math professor, but, says Elk, lost his job after being called to testify before the House Un-American Activities Committee. (Nichol’s name does appear on the testimony list in the summer of ’51.) Herbert’s wife, Lucy, worked on organizing Sylvania and Westinghouse plants in Pennsylvania. Post-university — Bard College, USC Davis — Elk followed in the family footsteps, going to work for the UE.

But this is Texas. Right-to-work legislation, ending compulsory membership, dates to Dallas Morning News associate editor William Ruggles and his long-famous Labour Day editorial of 1941. “Now this country may wish that it should become a vast network of union labour,” Ruggles wrote. “If so, it is within the rights of a democracy to so decide. But the greatest crisis that confronts the nation today is the domestic issues of the right to work as a member of a labour union, if the individual wishes, or without membership in a union if he so elects.”

There are union shops down here, but they’re dwindling, and Elk knows that in this job-hungry environment, and in this state, his chances are skinny. “It’s very hard to win a manufacturing campaign in a right-to-work state,” he said at the smokehouse. He’s intrigued that Caterpillar and GE appear to be following the same story line at the same time. “I don’t think they’re competitors at all. I think they’re oligopolists who have agreed to share market, carving up the locomotive market and at the same time moving in lockstep toward undermining good paying jobs.”

Elk gets especially steamed when he turns his mind to the current “competitive wages” mantra. Yet it’s on the back of just such talk that American manufacturers, with the hearty endorsement of the Obama administration, are touting the “re-shoring” of made-in-America manufacturing jobs in this election season.

Harold Sirkin, a senior partner at the Boston Consulting Group, is credited with doing the early digging on the re-shoring phenomenon. He remembers a conversation with his Chinese colleagues, more than two years ago now, in which they detailed escalating wages in China. “For me it was very simple,” Sirkin said in a phone interview. “I said, ‘So when does it cross over…When do wages in China start getting close, in essence, to wages in the U.S.?’”

No one had the answer. “When we sat down to work out the rates, all of a sudden the story became incredibly clear. You just had to do the math and figure out what was the year it would cross over. I did it on three different calculators just to make sure I didn’t screw something up.”

Sirkin’s year surprised him: 2015.

The flow of work back to the U.S. is disproportionately going to the south, Sirkin notes, but other states, such as non-right-to-work states California and New York, are drawing numbers. Right to work is part of the equation, he says, “but it’s more companies saying, ‘Where can I get the best productivity and the lowest-cost workforce?’”

On Friday, Boston Consulting released fresh projections for U.S.-based manufacturing growth, predicting that rising exports, plus re-shoring, could create up to 5 million jobs by the end of the decade. Added factory work is expected to account for as much as 25 per cent of that. The U.S., Sirkin said in a news release, “is becoming one of the lowest-cost producers of the developed world.” The top three drivers: the cost of electricity, natural gas — and labour.

To put the jobs numbers in perspective, a report co-authored by Sirkin and published in August 2011, tallied the total manufacturing jobs lost in the decade since China joined the World Trade Organization at about 6 million.

Out on the flatlands of the outskirts of Fort Worth, Gene Elk drives around the back of the new GE facility, which is spread across more than 83,000 square metres. A couple of tractors rumble across the gravel bedding toward the curvature of the spur line. The right rail of the unfinished spur reaches out toward the plant, not more than 100 metres away.

Early reports had pegged locomotive production by year’s end. That doesn’t seem likely. In response to a query, GE says it expects the facility to officially open late in the fourth quarter, though does not clarify production rates.

Elk says the company initially described the plant as an overflow facility, taking on what Erie could not. “Does this look like overflow to you?” he asks. Like Zaczyk, Elk has that fear in the back of his head. Here’s a point he would like to make: “The whole idea of industrial unions is to maintain industrial standards. With two-tier wages, industrial standards are effectively out.”

Well, brother, let me introduce you to your brethren.

Bad news has recently arrived. Pike’s local represents American Airlines maintenance workers at Fort Worth’s Alliance airport. “It’s rough on my folks right now,” says Pike, kitted out in cowboy hat and boots, a cross hanging on the wall behind him, with the lone star and steer horns at its crux.

“They’re outsourcing our Boeing triple 7,” Pike continues. “It’s going to China.” Of the 1,800-some jobs at the base, Pike estimates that no more than 400 will remain. Some of the workers have enough seniority — the base opened in 1991 — that they will softly land in retirement. Some will bump to other bases. Many more have a decade’s work under their belt, or less. “There’s at least 500 who are going to be hitting the street,” Pike says.

Naturally, all eyes are on the new GE shop, and possible jobs there.

Eddie Maldonado drifts by Pike’s office, stops, leans into the door frame. Maldonado attended one of the GE job fairs at the Texas Motor Speedway and put in an application, but remains unclear what long-term financial prospects would come with a job there. “At the job fair they were telling people they were paying $16.50, $17.50,” he says. “I kept asking everybody, what’s their top? How far can anybody go? Cause that’s what people want to know. Some people will take a $5 pay cut for four years if after four years they can make more.”

As a mechanic, Maldonado currently pulls in about $32 an hour. Like Ralf Zapke, he’d be looking at a 50 per cent pay cut, if he could get on at the new works, and that’s a big if. GE says it cannot provide any information on wage rates.

Elk’s looking for an inside guy, and he does get a lead or two. Larry Pike calls around for some numbers, talking through the challenge as he does so.

“It’s gonna be tough,” he says. “I’ve been involved with organizing the TWU from time to time and it’s tough just to get into these places. We tried to organize Western Pacific. It’s a small railroad that just moves cars around certain areas of the metroplex (the Dallas-Fort Worth area) and I tried to help organize those folks and, man. We couldn’t get in.”

At half wages, Eddie Maldonado has a thought: Maybe he could work two of those jobs. And then he says, “You wanna talk about low wages. My wife’s from Panama. I know what low wages is.”

Elk tells Maldonado how big the GE facility is: “Man, it’s like half the size of the Texas Motor Speedway.” Then he tamps down the biggest rumour: that GE’s intention is to shut down Erie. The company has, in fact, invested tens of millions in that plant in recent years. “I don’t know if they’ll close it down,” says Elk. “But what they want to do is what’s called whipsawing — establish lower wages here and at some point in the future tell our members that they have to moderate their wages in order to compete.”

Pike has a meeting to head to. He grows reflective for a moment. “Fort Worth used to be a good union town,” he says. “Fort Worth more so than Dallas. I can’t stand Dallas. Dallas has always been a big corporate city, but Fort Worth has always been laid back and middle class.”

Townsend speaks quickly, and in long sentences, and he has more to say about this current political moment. “All these companies surely have come to a consensus that $13 an hour more or less, or somewhere in there, that that’s the rate of pay that the tycoon chairs have sort of said, yeah, we will continue to do some manufacturing in the United States if that’s where we can slot it.”

Ralf Zapke never did have to face the new tomorrow. I called Lise, hoping he would be up to a visit. Ralf Zapke passed away at London’s Victoria Hospital on Sept. 13. A memorial service was held Friday.

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